Oil hits 2016 high above $40; glut warnings resurface

Brent crude rose on Monday, hitting a 2016 peak above $40 a barrel as investors rotated more assets into raw materials, with oil buying encouraged by talk that OPEC producers want a higher anchor price after a selloff that has lasted nearly two years.

Gold and iron ore also were at multi-month highs. Oil prices also got a boost from data showing a smaller-than-expected build in stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude futures. But some analysts cautioned that the global crude glut remained big.

Global crude prices have risen more than 40 percent since hitting 12-year lows less than two months ago. The rebound from lows of around $26 a barrel has also been driven by chart-related buying and asset rotation by investors that resulted in higher allocations into commodities such as oil and metals, as well as equities.

Brent LCOc1, the global crude benchmark, was up $2.18 at $40.90 by 1:13 p.m EST (1813 GMT). Its session peak was $41.04, the highest since Dec. 9.

U.S. crude CLc1 was up $2 at $37.92 a barrel, after hitting a two-month high at $38.11.

Major OPEC producers are privately starting to talk about a new oil price equilibrium of $50, New York-based consultancy PIRA told Reuters.

Bullish bets on Brent hit a record high in the week to March 1, while those for U.S. crude reached November peaks as hedge funds abandoned some of their very bearish views on oil.

Technical analysts said the oil rally could be nearing exhaustion at $40. Others said the global crude market remained oversupplied by around 2 million barrels per day, while higher prices raised the prospect of U.S. shale oil producers adding more drilling rigs after recent cutbacks.